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What You Need to Know Before Getting Your First Credit Card

Published July 5, 2019
Man looking at credit card, and working on laptop computer 

“Credit cards are amazing! You have to get one!”

“Stay away from credit cards. They only lead to crippling debt.”

We’re sure you’ve heard both sides before. It can leave many young people, like yourself, not knowing what to do when thinking about applying for their first credit card. Let us break it down for you.

Are credit cards evil? No, of course not. Using them responsibly makes them a great tool not only to make purchases, but it also helps you build a strong credit history and credit score. This will really help you when you need to get a loan for that first car. Or any other loan for that matter.

So now that we’ve established that a credit card isn’t plastic-wrapped evil, we wanted to go over some other things you need to keep in mind before applying for your first card.

You might get denied

Hang on. Don’t freak out. Getting your first credit card can be a catch-22. You need one to build credit history but you can’t get one without credit history. You might get denied for cards you apply to. Fear not because you do have other options.

You can visit the branch where you have your checking account and talk with someone explaining that you are wanting to build your credit with a credit card. Sometimes they can get your started with a low-limit card.

Other credit card vendors also have different credit cards that are specifically designed for people wanting to build their credit. These cards usually come with a lower limit and might require a deposit. After a year or so of responsible use, you can get your deposit back and get upgraded to a better card.

Understand APR

You see this everywhere on posters and commercials. But what does it mean? APR stands for “annual percentage rate.” This is the rate you will be charged if you don’t pay your full balance by your payment date.

When you’re shopping for your card, keep an eye on the APRs for different cards. Some can be as high as 30%. When you have a higher APR credit card and don’t pay your full balance, it can start to snowball what you owe to the point where it will be very difficult for you to get back ahead.

Plan to pay more than the minimum payment

Actually, plan to pay your entire balance every month if at all possible. It helps your credit score because you’re not carrying over debt from month to month. We just talked about that in the previous section. You’re also not having to pay interest on your balance.

Interest rates on credit cards average around 16.73 percent, so our advice is to not overstep your financial boundaries and you’ll be just fine.

How do credit cards affect your credit score?

There are 5 different areas that make up your credit score with each carrying a different weight.

  • Payment History (35%)
  • Amounts Owed (30%) 
  • Length of Credit History (15%)
  • New Credit (10%)
  • Types of Credit In Use (10%)

Know your card’s benefits

Not only should you decide whether a card’s terms align with your financial goals, take a look at the rewards to see if you can take advantage of all it has to offer. Say you like to dine out, see if that card has a cash-back program for restaurants.

The same thing goes for travel where cards will reward you miles that you can use towards airfare. Picking a card and not knowing its benefits causes you leave money on the table.

However, don’t pick a card solely for the rewards. Like we said at the beginning of this section, make sure the terms and conditions work with your financial situation first. Then you can start comparing rewards programs.

Credit cards seem scary at first, but once you understand them, they really are a good tool to help better your credit and finances. It’s just all about not overextending yourself.

Stay tuned because this is only the beginning of our credit card series.

Headshot of Jordan Ottaway
Jordan Ottaway contributed to the Neighborhood Credit Union blog from 2016 - 2019.